An Empirical Test of the Search, Experience and Credence Attributes Framework

Gary T. Ford, The American UniversityDarlene B. Smith, George Washington UniversityJohn L. Swasy, The American University

ABSTRACT - This paper provides an operational definition of the terms search, experience and credence attributes. The paper discusses the problems encountered in developing the definitions and describes the results of an empirical test of the operationalization.

AN EMPIRICAL TEST OF THE SEARCH, EXPERIENCE AND CREDENCE ATTRIBUTES FRAMEWORK

Gary T. Ford, The American University

Darlene B. Smith, George Washington University

John L. Swasy, The American University

[Completion of this research was facilitated by the Summer Research Grant program in the Kogod College of Business Administration which supported Ford and Swasy, and by the University Facilitating Fund at George Washington University, which supported Smith.]

ABSTRACT -

This paper provides an operational definition of the terms search, experience and credence attributes. The paper discusses the problems encountered in developing the definitions and describes the results of an empirical test of the operationalization.

INTRODUCTION

Information economists believe that the major role of advertising is to provide information to consumers and that consumers interpret advertising appropriately and use the signals that advertising provides in their purchase decisions. The advertising-as-information perspective has been given the most impetus by the work of Nelson (19, O, 1974) and Darby and Karni (1973). Central to their work is the concept that goods, or more precisely the attributes of goods, have "search," "experience" or "credence," (hereinafter referred to as SEC) properties. These properties describe the point in the purchase process when, if ever, consumers can accurately assess a product's performance.

In the years since Nelson (1970) and Darby and Karni (1973) published their now classic articles, several studies have appeared in the marketing literature that have relied on the SEC framework (Bloom and Krips 1982; Orsini 1982; Sheffet 1979; Smith 1986; Zeithaml et al. 1985). Even more importantly, policy makers at the Federal Trade Commission use concepts drawn from the Nelson and Darby and Karni works as a basis for establishing advertising regulation policy (Federal Trade Commission Policy Statement on Deception 1983; Ford and Calfee 1986). Yet, a review of the extant literature reveals that there have been few attempts to rigorously examine the validity of the search, experience credence framework (Bond 1982). This research represents a start in that effort.

The manuscript is organized as follows. In the next section we provide a summary of important concepts from the advertising-as-information literature, paying particular attention to defining search, experience and credence. Then, we describe difficulties encountered in our efforts to operationalize the SEC framework. Finally, we present the coding scheme and preliminary results of attempts to categorize product claims using the SEC framework.

SEARCH, EXPERIENCE AND CREDENCE CLAIMS: AN OVERVIEW

Nelson (1970) and Darby and Karni (1973) began with the assumption that consumers are aware that the purpose of advertising is to persuade and consequently, are aware that advertisers have an incentive to exaggerate, if not mislead consumers, about the characteristics of goods. Thus, consumers are inherently skeptical of advertising claims and will continually attempt to assess whether advertising is truthful.

Nelson (1970) asserts that the amount of information in advertising varies directly with consumers' ability to verify advertising claims at reasonable cost prior to purchase. If consumers can assess the truth of the claim through prepurchase "search" activities, advertisers' incentive to lie about the characteristics of their goods is reduced considerably. If on the other hand, consumers cannot accurately assess the truthfulness of claims prior to purchase, or perceive that the cost of prepurchase inspection exceeds its expected value, manufacturers have a greater incentive to dissemble and consumers have less reason to believe the advertising.

Nelson coined the term "search qualities" to describe those qualities of a brand that "the consumer can determine by inspection prior to purchase" and "experience qualities" to refer to those that "are not determined prior to purchase." (Nelson, 1974, p. 730) As examples, Nelson used the style of a dress for a search quality and the taste of a brand of canned tuna fish as an experience attribute. Darby and Karni (1974) contributed the idea that certain qualities can never be verified by the average consumer This occurs because the consumer may not possess sufficient technical expertise to assess the product's true performance, to diagnose his/her own need for the product or service, or because diagnosing a need separately from filling the need at the same time is uneconomical or difficult. These qualities were termed "credence". As examples of credence attributes Darby and Karni (1973) describe complex automobile repairs or medical services such as gall bladder surgery. In both eases the consumer is unlikely o know with absolute certainty whether the diagnosis was correct and is unlikely to have the technical expertise to assess the quality of the service provided.

As noted in the introduction, little empirical information exists concerning whether consumers perceive advertising and behave in this way. An analysis of the existing literature reveals that the validity of the SEC framework has not been empirically tested with consumers, nor have the terms "search," "experience" and "credence" qualities been defined precisely. Therefore any attempt to complete research using the SEC attribute framework, must begin by developing operational definitions of search, experience and credence attributes. This is the topic of the next section.

SEC: DEFINITIONAL ISSUES

Before we address the issues surrounding the SEC framework it is important to note two points. First, in the past, researchers have often referred to "goods" or "attributes" of goods as having either search, experience or credence qualities. More appropriately, the focus must be on the advertising claim, rather than the attribute of the product. That is the position taken in this paper.

Second, from our perspective, the keys to having workable definitions for a SEC typology were to adhere to the conceptual definitions provided in the economics of information literature while simultaneously incorporating a "real world" perspective about how advertising claims are made, about levels of consumer expertise, about the extent of information available in the environment and our judgments about how consumers react when faced with certain advertising claims. We return to these concerns in the discussion section.

SEC: OPERATIONAL ISSUES

The definitions provided earlier for SEC qualities can be summarized as follows: Search qualities are those that can be verified easily prior to purchase by actual inspection of the good; experience qualities are those that can only be verified after purchase and consumption of the product; and credence qualities are those that cannot be verified even after purchase and consumption.

The SEC framework appears to have a great deal of face validity. Consumers can readily visualize advertising claims that can be determined prior to purchase, such as the price of the product. Likewise, they can identify claims that can only be assessed after purchase, such as whether a restaurant meal offers good value or whether a pair shoes is comfortable. Furthermore, consumers can also identify claims they have no way of assessing, such as the quality of care provided by a local automobile mechanic. Despite this face validity, an attempt to actually use these reasonably appearing definitions in empirical research, reveals that their operationalization is much more difficult than appears on the surface. The following paragraphs address the most difficult problems we encountered in two economics of information studies.

BACKGROUND

Our studies sought to determine: (1) the extent of search, experience and credence claims in print advertising and how this is related to product characteristics such as price; and, (2) whether consumers are least skeptical of search claims and most skeptical of credence claims. To realize these objectives, claims had to be categorized as search, experience or credence. This categorization activity was complicated by three general factors: ad execution issues, consumer expertise and the availability of information availability to consumers.

AD EXECUTION ISSUES

Advertising copywriters have an almost limitless number of ways by which to present the benefits of products. For example, print advertising can contain assertions about a products' attributes or performance or can merely imply those points, (e.g., Who's building the best American cars?); it can emphasize the brand name over the product features to provide signals about product quality; it can use humor to get attention and so on. In addition, print advertising can contain mandated information such as the tar and nicotine levels and warning information included in cigarette ads.

Because of the variety of ways advertiser have of making their points, a number of ad execution issues germane to the economics of information appear. First, since our research focuses on advertising claims, an operational definition of the term "advertising claim" was required. For the purposes of this research, an advertising claim was defined as information contained in an advertisement about (1) the existence and/or level of a product's features, (2) the characteristics of the product or the market for which it is intended, or (3) the consequences of using the product, the benefits of the product use, and/or the values attained or emotions produced by product use or ownership. This definition excludes advertising statements that cannot be verified either because they are so vague as to be meaningless, e.g., "Things go better with Coke," because they represent mandated warning information, such as the cigarette warnings, or because they are obvious examples of puffery, e.g., "We feed the world" and other such noncLaim statements.

A second advertising execution issue concerned whether claims must be actually expressed in an advertisement or need only be implied. At this stage of our research, it was decided to focus on expressed claims rather than on attempting to infer what was intended in an implied claim. A third ad execution issue concerned complex advertising statements that contained two or more claims one of which could be categorized as, for example, search and another of which could be categorized as an experience or a credence attribute claim. The statement that "With the Modified American Plan, the XX resort hotel provides gourmet meals at affordable rates," is an example of an experience attribute claim (gourmet meals) followed by a search attribute claim (affordable rates). In these situations, the complex claim was simplified to only include the most prominent single claim.

We handled the ad execution issues by limiting our operational definition of an advertising claim to expressed statements about one attribute of what a product is, does, how it is used, what benefits it delivers and the like. In this way the claim had the most clarity for the judges who attempted to categorize it as search, experience or credence.

CONSUMER EXPERTISE/EXPECTATIONS FACTORS

There are two basic problems that had to be overcome. First, for the true experts about a product class almost every claim is a scar h claim while for the true novice the same claims become experience or credence claims. This is especially a problem for complex electronics products, automobiles and other durable goods. For example, a claim such as "The XX microcomputer contains the revolutionary 80386 chip," may be one that the novice can never verify while an expert could simply remove the cover from the machine and determine whether the advertised chip was there. In this study, judges were instructed to assess claims in the context of the "average" consumers' ability to verify the claim.

The second problem concerned consumer expectations about the implicit veracity of label information. Many consumers probably expect that claims regarding ingredients can be verified prior to purchase since they believe information on labels is true; even though there is no direct way for the consumer to verify the truthfulness of label information. Our approach to this issue was first, to exclude label information claims (e.g., health warnings) as an ad claim unless the dominant claim in the text explicitly featured label content. In these cases as with the other ad claims, judges were to categorize such claims in light of how they felt the average consumer would interpret them.

INFORMATION AVAILABILITY FACTORS

Information availability issues encompass whether information from an independent third party about the claim veracity exists, whether the consumer knows such information exists and the perceived cost of obtaining the information. A publication such as Consumer Reports may be used to verify the ingredients or physical attributes of a product as well as to assess its level of performance on any of several dimensions. In this case, information from an independent testing organization can be used by consumers to transform credence and experience claims into search. Thus, the term "search" is used to refer to more information than can be obtained by only direct inspection of the product prior to purchase.

Related to these points are the complicating factors that information about the veracity of a claim may be available either in the public domain or through another source but the average consumer may not know where to find it or may perceive that the cost of obtaining the information is too great. Thus, again what may be a search claim for one consumer may be credence for another. Consider the claim "We're the number one seller of aspirin." Information may be available from specific sources such as Simmons Market Research Bureau, but the average consumer would not know of the data or how to use it. Alternatively, writing to the company for information may not be perceived as low cost, reasonable information gathering prior to purchase. Hence, claims of this nature may be credence claims to the average consumer because they can not be verified at reasonable cost prior to purchase.

Finally, as recognized by the experience concept, information becomes available to the consumer through using the product. A question arises as to how much use is needed to verify a claim. At the extreme one might have to use a product for its entire life to assess a claim. For such a claim to be considered an experience claim, rather than a credence claim, we applied the criteria that the required time to verify the claim should be relatively short in-comparison to the product's total usage life.

DEFINITIONS

Consistent with the preceding discussion the following operational definitions were developed:

Search claims are those claims that can be accurately evaluated prior to purchase using prior knowledge, direct product inspection, reasonable effort, and normal channels of information acquisition, such as Consumer Reports.

Experience claims can be accurately evaluated only after the product has been purchased and used for a period of time which is relatively short in comparison to the product's total-usage life.

Credence claims are those that cannot be accurately evaluated even after the product is used because of the consumer's lack of technical expertise or because the cost of obtaining sufficient accurate information to check the veracity of the claim is higher than its expected value. Such claims can be verified by experts.

Notice that these definitions, while somewhat broader than those used by Nelson and by Darby and Karni, are limited to verifiable claims and yet retain the essential elements of the SEC framework. The chief differences are 1.) the search category is expanded to include information available in naturally occurring consumer environments; 2.) experience is limited to usage that occurs over the beginning stages of a products' useful life and 3.) credence stems primarily from technical expertise and high cost of evaluation.

METHODOLOGY

Sample of Advertising Claims

As pan of a larger study to determine the extent to which search, experience, and credence attribute claims appear in print advertising, a sample of 100 magazine ads were drawn. The population of ads consisted of all non-duplicated one-quarter page or larger ads appearing in the first March 1987 issue of the top five (in total circulation), female-oriented magazines (defined as at least 60 percent female readership). Circulation was defined as average potential ad readership (i.e., total number of subscribers times number of issues per year times average number of ads per issue). The top five magazines so defined were People, Good Housekeeping, Family Circle, Reader's Digest and Better Homes and Gardens. A systematic random sampling process was used to select 100 ads from the above population.

Next, up to three verifiable, expressed claims were selected from each advertisement. This selection was done first independently and then by group discussion among the authors. If the ad contained more than three expressed claims, the three most prominent claims were selected. Prominence was assessed as a function of-where the claim appeared in the ad, size of the typeface, consistency with the overall theme of the ad and so on. In ads with more than three prominent claims, three were randomly selected. Where possible, complete sentences that stated the claim were taken verbatim from the advertisement. If the claim was not presented in a sentence, a declarative sentence format was created to ensure uniformity and understanding.

Categorizing the Claims

The above procedure resulted in a list of 198 claims drawn from the female readership magazines. The judges were three Ph.D. economists from the FTC and one marketing Ph.D. All were familiar with economics of information literature and all were female. The definitions provided above were given to and discussed with each judge. The "stimuli" were the list of claims along with a short description of the type of product or service the claim was for such as "frozen dinner entrees' or "automobile tires," to provide a context for the product claim. All brand identification information was removed from each claim to reduce the possible confounding effects this information might have. Although not of interest in this paper, judges also rated the objectivity/subjectivity of each claim.

RESULTS AND DISCUSSION

The key issue for this paper is whether the judges were able to use the SEC definitions that were developed and the instructions that were given in a consistent fashion; in other words, how well did the coding scheme work and what were its weaknesses? In order to answer this question we computed the degree of agreement in classification for each pair of judges. We also examined whether individual judges differed from their peers in any consistent fashion be computing Cohen's kappa (1960). Finally, we examined individual ad claims for which there was wide disagreement in an attempt to understand post hoc what types of claims caused coding difficulties. The results of these analyses are presented below.

The percentage agreement in classification for each of the six pairs of judges (judge 1 vs. judge 2, judge 1 vs. judge 3, etc.) ranged from a low of 68 percent to a high of 73 percent, indicating that there was little difference between individual judges in use of the coding scheme. Further we were unable to detect any bias in classification between pairs of judges. For example, above is the Table for judges 1 and 2, who had 72 percent agreement (46 + 66 + 31)/198 is typical of the classification comparisons. As can be seen, although as compared to judge 1, judge 2 classified more of the claims as search, judge 2's non-matching responses were evenly split between experience and credence categories.

Because the 198 advertising claims are being assigned to only three categories, there may be a nontrivial amount of agreement due solely to chance. To correct for this, we also evaluated the interjudge reliability with Cohen's (1960) kappa coefficient which reflects the proportion of agreement adjusted for chance:

kappa=[ %(agreement)-%(chance)]/[1-%(chance)]

Chance agreement, which is equal to the sum of the joint probabilities of cells on the diagonal, for judges 1 and 2 is .34, i.e., (.099 + .186 + .0' 5). The kappas were nearly identical for each pair of judges (.52, 55, .57, .57, .58, .59), which once again suggests that no one judge was using the coding scheme in a much different way than her peers.

Unfortunately, there is no "standard" kappa level which can be used to determine whether kappa is high or low [To provide some perspective on the kappa values it should be noted that kappa can reach a maximum of +1 if. the marginal distributions are the same for each judge. Only judges 2 and 4 evidenced such a similarity (kappa of .57.) Of more interest is the maximum value of kappa possible given that judges differ in their marginal distributions. An estimate of this can be calculated by first determining the minimum marginal likelihood for each category. For example, using judges 1 and 2, for search attribute claims, the minimum is .258, for experience .424, and for credence the minimum was .177. Substituting the sum of these minimum values for the "96(agreement)" term in the kappa equation yields a kappaCmax value of .79. Thus, the attained kappa for these judges is .73, i.e, (.58/.79) of the possible kappaCmax.]. Common sense suggests however, that the coding scheme worked quite well since, even after adjusting for chance agreements, each pair of judges agreed exactly on the categorization of over one-half of all the claims.

The evidence that no strong differences existed between how pairs of judges coded claims increased our confidence that it was appropriate to aggregate the results over all four judges. Using an arbitrary rule that a claim was successfully categorized if assigned to one category by at least three of the four judges, allowed for the assignment of 163 (83 percent) of the claims. Of these 34.3% were classified as search, 44.1% experience, and 21.4% credence. The highest level of unanimous agreement occurred for experience claims at 69 percent. For those designated search, 59% were by unanimous agreement. The judges had complete agreement for 46% of the credence claims.

Together, these analyses suggest we were reasonably successful in developing a reliable coding scheme. Aggregating the results for the four judges allows classification of all but 17% of the randomly selected claims. There is some suggestion, however, that judges were more consistent in classifying claims as experience and less consistent in classifying claims as credence. Why this may have occurred is discussed next.

An inspection of these inconsistently coded claims and discussions with the raters revealed three issues and anomalies worth comment. First, the problem which caused the most difficulty and disagreements among the raters was the fact that despite our efforts to select and present single claims, some contained, or could be read so as to contain, multiple claims that varied as to their classification. For example, consider the claim, "X has an exquisite blend of wine and the choicest herbs and spices," (food sauce). Originally we thought this to be one claim, however, it can be read as two; a claim about "an exquisite blend" and a claim about "choicest herbs." The first claim is about an experience attribute while the second is for a credence attribute.

A second, more judgmental problem concerns whether claims are read completely literally or are discounted somewhat by consumers. The claims that, "X video provides unmatched excitement," (video) and "X's system 25 is perfect for businesses with 20 to 150 phones," (phone system) provide examples of claims that will be categorized differently depending on whether the claim is interpreted literally or not. If one assumes that consumers interpret "unmatched excitement" or "perfect," literally these claims must be categorized as credence attribute claims. If, instead consumers comprehend "unmatched" as "a lot of," and "perfect" as "'suitable for," then the claims could be experience or search attribute claims. These examples indicate that the coding scheme must attempt to anticipate whether consumers will or will not discount advertising claims extensively, and whether the extent of such discounting varies by whether it is an search, experience or credence attribute claim. To the degree that such discounting exists, some claims may be more accurately categorized as "discounted-to-experience" or "discounted-to-search" attribute claims.

The third major problem concerned whether the judges believed or knew that independent third party information existed about the claim. For some claims, a judge would pencil in a note, such as, "If Consumer Reports rated this it is search, otherwise it's credence." There does not seem to be a good way to handle this problem. That is, one could tell the judges, when in doubt "assume that no outside information is available" or alternatively that there is, but this while increasing consistency would not really capture what is going on for the average consumer.

CONCLUSIONS

In this paper we have attempted to develop operational definitions for search, experience and credence attribute claims and to test those definitions by having expert judges classify a randomly drawn sample of actual claims from ads appearing in national magazines. While the results of the coding scheme and instructions indicated that six out of every seven claims could be coded, it is clear that some intractable problems exist. To an extent, some difficulties are inherent in any coding of complex, real ads. More importantly, these difficulties are compounded when one is also attempting to operationalize a theoretical framework that has not been tested before.

Despite these difficulties, the coding scheme we developed worked quite well and gives encouragement to future attempts to estimate the percentage of SEC claims appearing in advertising by product category or to investigate other aspects of information economics theory such as whether consumers are differentially skeptical of SEC claims.

We must conclude, however, with a note of caution. The SEC framework is intuitively appealing, and it is understandable that FTC policy makers have embraced a theoretical framework that offers guidance regarding where to concentrate limited resources. But the implicit assumption of the information economists that ad claims can be unequivocally assigned to one category or another, and that consumers are likely to engage in the level of processing that this task would require, is a weak assumption at best. In the raucous world of advertising, statements will be made that include multiple types of claims, hyperbole will almost be the norm and different consumers will interpret the same claims in different ways. Whether the elegant SEC framework actually can explain interpretation of claims in the world of modern advertising remains an open question.

REFERENCES

Bloom, P. and J. Krips (1982), "An Experiment in the Economics of Information," Journal of Marketing and Public Policy, 25-42.

Bond, E. (1982), "A Direct Test of the Lemons Model: The Market for Used Pick-up Trucks," American Economic review, 836-42.